Talk about a spoiler alert - consider this introductory statement in a Financial Industry Regulatory Authority ("FINRA") disciplinary Decision is this ominous nugget:
This is a serious case of a broker in severe financial difficulty who engaged in a scheme to convert customer funds in order to pay his personal expenses and to conceal this misconduct from his firm.
Ummm, yeah, okay - so, what FINRA is hinting at is that this isn't going to turn out well for the stockbroker respondent, right? Gee, talk about telegraphing the bad news.
The Case In Point
According to FINRA, on December 19, 2008, Bishop Rosen & Co., Inc. registered representative Robert Durant Tucker, who had entered the securities industry in 1989, prepared a wire request form instructing the broker-dealer's clearing firm to wire $4,500 into his personal checking account from the account of one of his longtime customers, who was a retired World War II veteran in his eighties. As part of its compliance policies and procedures, Bishop Rosen required
In an apparent effort to hide the transfer, Tucker signed the transfer form as the account's registered representative and as a supervisor - pointedly, he was not authorized to serve as a supervisor and did not obtain the required approval of a supervisor. According to FINRA, Tucker simply circumvented the two-signature protocol by signing off as a supervisor in violation of the firm's policies. In a further attempt to obfuscate the transfer, Tucker did not use Bishop Rosen's fax machine to send the transfer form to the clearing firm but used the fax machine at a nearby retail shop.
Negative Balance Solution
Tucker's checking account had a negative balance of $65 just prior to the deposit of his elderly customer's funds. Following the $4,500 deposit, Tucker withdrew $3,900 and paid off various personal expenses, including a telephone bill, gym charges, and several point-of- sale purchases. Within two weeks of the deposit of the wired funds, the balance in Tucker's checking account was again negative.
Upon receiving statements disclosing the unauthorized transfer, Tucker's elderly client complained to a Bishop Rosen compliance officer, who confronted Tucker - at that time, Tucker did not deny the wire but promised to "fix it." Tucker then arranged for a friend to reimburse the funds to the firm for the benefit of the defrauded customer.
On September 8, 2011, the FINRA Department of Enforcement filed aComplaint against Tucker, who filed his Answer on October 28, 2011. Tucker represented himself during the July 2012 hearings.
According to FINRA Department of Enforcement, Complainant, v. Robert Durant Tucker, Respondent (FINRA Office of Hearing Officers, Hearing Panel Decision, 2009016764901, January 11, 2013), Tucker claimed that the elderly customer had agreed to invest the $4,500 in an alternative trading platform outside of Bishop Rosen, and it was Tucker's plan to transfer the funds to his checking account and then to a limited liability company. Such a transfer never took place and Tucker diverted the funds for his personal expenses. The customer did not recall any discussions about an alternative trading platform investment and promptly complained to the firm upon discovering the unauthorized transfer.
SIDE BAR: "Street Sweeper" readers know that I have often warned against investing in so-called "investment platform" or "trading platform" deals. Frankly, I don't think that I've ever seen an honest one. For some further guidance, read this past articles:
In addition to the explanation about the alternative trading platform investment, Tucker claimed that a Bishop Rosen compliance staffer had approved the subject transfer, the stockbroker could not recall any details about the conversation.The FINRA Decision notes that during FINRA's investigation (citations omitted):
Tucker offered a completely different response. He admitted that no one from the Firm was involved in the transfer but claimed that he left a voicemail for the compliance staff member about the transfer along with a message that he was resigning from the Firm. The Hearing Panel rejected Tucker's shifting story in favor of the credible testimony of the compliance staff member who testified that Tucker never asked him to approve any transfers to third parties.
Noting the absence of any mitigating factors and pointedly finding aggravating ones, the FINRA Hearing Panel considering the allegations against Tucker involving the wire transfer from his elderly customer's account ordered him to pay $3,087.15 in hearing costs and barred him upon finding that he had:
One of the truly jaw dropping aspects of this case is that Tucker had a prior disciplinary history.
In the Matter of the Application of Robert D. Tucker for Review of Disciplinary Action Taken by FINRA, (Securities And Exchange Commission, '34 Act Rel. No. 68210, November 9, 2012), the Securities and Exchange Commission ("SEC") affirmed FINRA's National Adjudicatory Council ("NAC") Decision, FINRA Department of Enforcement, Complainant, v. Robert D. Tucker, Respondent, (National Adjudicatory Counsel, Decision, 2007009981201, October 4, 2011), in which the NAC found that between 2001 and 2008:
Tucker failed to disclose his two bankruptcies, federal tax lien, three judgments, and one state tax lien on Forms U4, in violation of NASD Rule 2110 and IM-1001-1. For this violation, we suspend Tucker in all capacities for two years, require him to re-qualify as a corporate securities limited representative at the conclusion of his suspension, and affirm the Hearing Panel's assessment of costs of $2,392.30. Tucker's failure to disclose his two bankruptcies, federal tax lien, and three judgments were willful, and the omitted information was material; thus, Tucker also is statutorily disqualified.
In considering Tucker's appeal from FINRA's findings and sanctions, the SEC found that:
Tucker's repeated "false and misleading filings egregiously violated the standard of 'candor and forthrightness' required of associated persons" and that his evasive and contradictory explanations and testimony "ultimately reveal a disconcerting failure to acknowledge his own responsibility." (Rel. 34-68210; File No. 3-14613).
For more extensive coverage and analysis of the Tucker disclosure case, read: